Budget proposals: High tax rates promote parallel economy, says FPCCI

Asks FBR to cut taxes to help improve competitive edge in markets

KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed to the Federal Board of Revenue (FBR) to reduce tax rates in order to help enhance competitive edge of the country’s products in both domestic and global markets.

“This will help broaden the tax base and curtail the parallel economy. High tax rates provide incentives for tax evasion and corruption and also result in a high cost of doing business,” the FPCCI said in a statement on Wednesday.

This is one of the proposals that the FPCCI intends to present to the government for the federal budget 2018-19.

The FPCCI pointed out that out of more than 4 million National Tax Number (NTN) holders, the tax filers were 2.1 million in 2006-07, which dipped to 1.57 million in 2011 and further fell to 1.39 million in 2017. “This shows that the FBR has lost one million return filers over the last 10 years despite announcing higher withholding tax rates for non-filers who are happy to pay more in advance tax instead of filing returns,” he said.

The FPCCI underscored the need for taking measures to facilitate the existing taxpayers that were contributing to the national tax pool and encouraging potential taxpayers to come in the tax net voluntarily through persuasion instead of prosecution.

It voiced concern over excessively burdening the manufacturing sector that contributed 20.9% to the national economy and had a share of 70.4% in tax payments compared to the agriculture sector whose share in gross domestic product (GDP) and tax payments was 19.5% and 1.2% respectively in 2016-17.

In this backdrop, the FPCCI proposed a comprehensive action plan for the broadening of tax base and improving the tax-to-GDP ratio. 

Published in The Express Tribune, March 15^th, 2018.

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